# net present value calculation

*label*Economics

*timer*Asked: Nov 9th, 2014

**Question description**

**1**. East Coast Television is
considering a project with an initial outlay of $X (you will have to determine
this amount). It is expected that the project will produce a positive cash flow
of $60,000 a year at the end of each year for the next 14 years. The
appropriate discount rate for this project is 9 percent. If the project has a
12 percent internal rate of return, what is the project’s net present value?

**2**. Big Steve’s makers of swizzle sticks
is considering the purchase of a new stamping machine. This investment requires
an initial outlay of $105,000 and will generate net cash flows of $21000 per
year for 8 years.

A What
is the project NPV using a discount rate of 11% should the project be accepted,
why or why not?

B What is the project NPV using a discount rate of 14% should the project be
accepted, why or why not?

C What is the project internal rate of return? Should the project be accepted, why
or why not?

**3**. What
is the internal rate of return for the following project? An initial outlay of
$9500 resulting in a single cash inflow of $24301 in 9 years. What is the rate
of return for the project?